BANKING ANALYTICS

Ranking of the Azerbaijani banking sector (ranking includes the information component of the banking sector, the main events of the world economy, the analytical review of the main indices of the banks which are being ranked)

The final ratings are contingent on the receipt of final documents conforming materially to information already received.

Texnika Finance B.V., a special purpose vehicle (SPV), incorporated under the laws of the Netherlands, will only pay noteholders principal and interest (if any), received from TB. The issuer will charge certain rights and interests under the loan agreement to BNY Corporate Trustee Services Limited, for the benefit of noteholders under a trust deed. The claims under the loan agreement will rank at least equally with the claims of other senior unsecured creditors of TB, apart from those whose claims are preferred by any bankruptcy, insolvency, liquidation or similar laws of general application.

Under Azerbaijan law, the claims of the deposit insurance fund (which assumes the claims of insured retail depositors against a bank) rank above those of senior unsecured creditors. At end-2010, total (insured and uninsured) retail deposits accounted for 39 percent of total liabilities, according to the bank's statutory reports.

The loan agreement contains covenants prohibiting mergers and disposals by TB and its subsidiaries (the group), as well as certain payments and distributions by the group and transactions between the bank and its affiliates. It also contains a cross default clause and a negative pledge clause, the latter of which allows for the creation of a lien on up to 15 percent of the group's total assets.

TB commits to maintaining Tier 1 and total capital ratios of at least 6 percent and 12 percent, respectively, as calculated in accordance with Azerbaijan accounting standards (the minimum permitted regulatory levels). Noteholders will receive a put option upon a change of control event, which is deemed to have occurred if the bank's principal shareholders (Etibar Aliyev and his immediate family members; Kazimir Caspian Fund Limited; and World Wines) together cease to control TB (less than 50 percent of voting shares), and if such an event results in a rating downgrade.

At end-2010, TB was the fourth-largest bank in Azerbaijan by assets, with a 4 percent market share in banking system assets. TB is currently majority-owned (75 percent) by World Wines, with Mr.Aliyev and Kazimir Investment Caspian Fund holding the remaining 15 percent and 10 percent, respectively.